The Shady Truth about Amazon Basics

Amazon is strategically leveraging its platform to promote its own "Amazon Basics" products, often placing them above competitors even when those competitors offer better value or more features. This tactic is evident across various product categories, from microphones and monitors to micro SD cards and cables. The company’s data on consumer behavior allows them to identify popular or underserved product niches, then introduce their own affordable alternatives.

This strategy appears to be less about direct profit from Basics sales and more about a sophisticated ecosystem play. By offering competitive or seemingly good enough products that are prominently displayed, Amazon can incentivize sellers to invest more in sponsored advertising to gain visibility. This creates a dual revenue stream: the direct sales of Basics products and the increased ad spend from third-party sellers vying for limited prominent placements.

Furthermore, the widespread availability and prominent placement of Amazon Basics products contribute to the overall stickiness of Amazon's ecosystem. When consumers consistently find what they need at competitive prices directly from Amazon, it reinforces their reliance on the platform, encouraging Prime subscriptions and engagement with other Amazon services.

• Amazon Basics products are consistently placed at the top of search results, often above competitors with more reviews or better features.
• Amazon uses its extensive data on sales, returns, and customer preferences to identify and develop its own product lines.
• Amazon Basics products are not necessarily the best value but are positioned to make competitors appear more expensive or force them into costly advertising.
• Amazon's strategy aims to increase revenue through both direct Basics sales and increased advertising spending by third-party sellers.
• The ultimate goal is to strengthen Amazon's ecosystem by encouraging Prime subscriptions and further engagement with Amazon's services.

Related Video Summary

• What Vibe Coders Wish They Knew Sooner
• FORGET NANO BANANA?! Google RELEASED FREE AI that Can Make Money Online
• How Effective is Having an Audience Actually? (...It's Not What You Think)
• How To Survive The "Fast Fashion" Era of SaaS

Amazon Basics Product Placement Strategy [0:05]

• When searching for "desktop microphone," Amazon's own basics microphone appears first, even though a competitor with more reviews and a lower price exists.
• Similarly, for "gaming monitor," an Amazon Basics option is at the top, followed by sponsored products, before a superior ASUS monitor that is also cheaper on sale.
• Amazon Basics products are consistently positioned at the top of search results for various items like micro SD cards, with their offerings appearing before better value alternatives.

This section highlights how Amazon manipulates search results to favor its own Basics products, often pushing competitors down the page even when they offer superior value or more customer trust.

"Amazon's own basics microphone is the very first thing you see."

Amazon's Data Advantage in Product Development [2:08]

• Amazon knows immediately when a product type starts selling well, how often it's returned, which versions people prefer, and if there's a leading brand that customers are specifically searching for.
• This data has been used to decide what products to make, leading to accusations of data abuse.
• Amazon Basics has been observed to create near-identical copies of popular products, sometimes even mimicking the names, as seen with the Peak Design sling.

This part explains how Amazon leverages its vast dataset to identify market opportunities and create "Basics" versions of successful products, often by closely replicating existing popular items.

"Amazon knows immediately when a product type starts to sell well."

The "Amazon's Choice" Badge Controversy [4:16]

• The "Amazon's Choice" badge is awarded to high-quality, well-priced, and immediately available products, but Amazon designs the criteria.
• In many cases, Amazon's own products win these badges.
• Even when a competitor (like Anker for a USB-C cable) is the "overall pick" with a badge, the Amazon Basics version is still listed above sponsored posts, requiring customers to scroll to find the endorsed competitor.

This segment delves into the "Amazon's Choice" program, suggesting that the criteria for these badges can be manipulated to favor Amazon's own products, and even when an external product is favored, its visibility can be diminished.

"it's their own products that are winning their own choice awards."

Amazon's Ecosystem Strategy and Revenue Streams [7:26]

• Amazon Basics products are rarely the best value but are strategically priced and positioned.
• Amazon can undercut competitors because it doesn't have to pay seller fees (referral fees, monthly subscriptions) on its own platform.
• Amazon doesn't need to make a profit on Basics products; its goal is to keep people on the platform, encouraging Prime subscriptions and purchases of other Amazon services (Prime Video, Music, Kindle, Fresh).
• Amazon Basics products offer reassurance of reliability and easy returns due to Amazon's logistics.

This section explains that Amazon Basics' primary purpose is not direct profit but to strengthen the overall Amazon ecosystem by increasing engagement and recurring revenue through Prime subscriptions and other services.

"We want to make money when people use our devices, not when people buy our devices."

The Real Purpose of Amazon Basics: Driving Seller Ad Spend [12:50]

• Amazon's website has two main revenue streams from sellers: referral fees from sales and fees from sellers paying to appear higher in search results.
• By making it harder for third-party sellers to compete organically, Amazon incentivizes them to pay for sponsored ads.
• Competitors like Duracell and Energizer, which used to be at the top, now only appear due to paid placements and have "sponsored" labels, making them appear less organic than Amazon's products.
• Amazon Basics creates a competitive frenzy where sellers must either offer exceptional products with minimal profit or enter a bidding war for sponsored slots, both of which benefit Amazon.

This is presented as the core strategy: Amazon Basics products are a tool to force third-party sellers to spend more on advertising, thus generating significant revenue for Amazon beyond direct product sales.

"Amazon makes a ton of money. And basics is actually just the start of it."